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Cross-Dynastic Intergenerational Altruism

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  • Frikk Nesje

Abstract

I study whether saving behavior reveals socially relevant intertemporal preferences. To this end, I decompose the present generation’s preference for the next into its dynastic and cross-dynastic components in a model of saving. If people are concerned about the next generation as such, then they might assign welfare weights on other dynasties. With such cross-dynastic intergenerational altruism, saving for one’s descendants benefits present members of other dynasties. These preference externalities imply that socially relevant intertemporal preferences cannot be inferred from saving behavior. Numerically, I show that even \small" preferences for the next generation as such can lower the efficient discount rate by 20% to 40%, as compared to Nordhaus’ calibration.

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  • Frikk Nesje, 2022. "Cross-Dynastic Intergenerational Altruism," CESifo Working Paper Series 9626, CESifo.
    • Handle: RePEc:ces:ceswps:_9626
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    Cited by:

    1. Ahlvik, Lassi, 2022. "Will of the living dead — The case for a backward-looking welfare function," Economics Letters, Elsevier, vol. 214(C).
    2. Robert C. Schmidt & Moritz Drupp & Frikk Nesje & Hendrik Hoegen, 2022. "Testing the free-rider hypothesis in climate policy," Papers 2211.06209, arXiv.org.
    3. Frikk Nesje & Moritz A. Drupp & Mark C. Freeman & Ben Groom, 2022. "Philosophers and Economists Can Agree on the Intergenerational Discount Rate and Climate Policy Paths," CESifo Working Paper Series 9930, CESifo.

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    More about this item

    Keywords

    intergenerational altruism; social discounting; time-inconsistency; declining discount rates; generalized consumption Euler equations; interdependent utility; isolation paradox;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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